Real estate experts tell first-time home buyers that it's critical to apply for a loan before shopping for a home, and it's true. This is a crucial first step, and there are many advantages to gaining pre-approval. When the lender hands a borrower a Pre-approval Letter, it means the borrower can:

Save Time by Looking at the Right Homes — If your real estate agent is sending you e-mail notifications of new listings, you can ask him/her to fine-tune parameters to more precise selection of homes that you are qualified to buy. Or when you and your agent are searching for homes, you can both narrow down and just look at homes you can actually afford to buy instead of falling in love with pie in the sky.

Spend More Time Examining the Right Homes — By narrowing down the number of homes to those that fit your budget, you can allot more time to thinking about all the little nuances each home has to offer. Lots of home buyers never move past the price point when sorting out their preferences, but now you can devote your energies to looking at the little things that matter to you most such as whether your SUV will pass through the overhead space in the garage or smash into the microbeam.

Gain Confidence & Avoid Disillusionment — Now when you find that perfect home, nobody can take it away from you by telling you that you can't afford to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You'll sleep better at night knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not "lose face" with anybody.

Increase Bargaining & Negotiating Power — Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that her home is sold. She can take her home off the market and place it into pending status with confidence.

Enjoy a Faster Closing Period — Because there is no window period while your loan application is processed, the lender can speed up the entire loan processing procedure. Appraisals can be ordered immediately. It's possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can't decide which offer to accept. Yours will move to the front if you can accomplish the seller's need for a quick close.

Because home loan approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a pre-approval letter as soon as you're ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit agencies.